The foundering of several bedrock financial companies helped create a perfect storm today, spurring to one of the worst trading days in nearly a decade. The tech sector didn’t escape the catastrophe, but fared more buoyantly than almost all others, closing the day with some big news of its own.

The foundering of several bedrock financial companies helped create a perfect storm today, spurring to one of the worst trading days in nearly a decade. The tech sector didn’t escape the catastrophe, but fared more buoyantly than almost all others, closing the day with some big news of its own.

advertisement

News of the bankruptcy of the venerable investment bank Lehman Brothers [LEH] and the slumping insurer American International Group [AIG] joined with anxiety over the roiled credit market to drive down the Dow Jones Industrial Average, which saw its biggest one-day drop since September 11, 2001. Several bellwether stocks in the technology sector showed surprising resilience early in the day, and most NASDAQ index stocks saw with only minor falls.

By noon Monday they were making an improbable escape from the most dismal effects of today’s trading, with the NASDAQ index down only about 1.3% by 12pm EST. But the closing bell told a different story, with that index down 3.26% at day’s end. The other indices fared worse, with the Dow Jones Industrial fell 504 points, or 4.42%, and the S&P 500 plunging 4.71%.

Apple and RIM, normally consistent performers, ended up surprising investors by tumbling more than their tech peers, closing down 5.24% and 6.30% respectively. Yahoo [YHOO], Amazon [AMZN] and Google [GOOG] fared better with drops of only 0.58%, 0.88% and 0.65% respectively. Microsoft [MSFT] and Oracle [ORCL] also fared better than Apple and RIM, losing 2.32% and 2.70% respectively.

But it was HP [HPQ] that stole the tech show this afternoon, announcing massive job cuts as part of a three-year cost-cutting plan that should save them $1.8 billion per annum. Most of those cuts will result from a merger with computer services provider Electronic Data Systems Corp [EDS], which was announced in May. The company says it will replace about half the cut jobs over the next few years in new areas of its computing services business. Nearly half of the job cuts, which account for 7.5% of HP’s workforce, will occur in the United States. And while job cuts are never good news, this is a merger borne of profitability, not distress, as with the purchase of Merrill Lynch [MER] by Bank of America [BAC].

Best Buy [BBY] was making news on the retail side by acquring Napster [NAPS], which offers customers online music downloads on a subscription basis. Best Buy will pay $121 million for the company, which has recently tried to reposition itself as a direct competitor to Apple’s iTunes. The deal will include both Napster’s online and mobile platforms, which total about 700,000 subscribers. Having Napster in its pocket will allow Best Buy to compete more ably against fellow brick-and-mortar music seller Wal-Mart [WMT], which rivals the company for electronics sales and has an online music store of its own. Wal-Mart fell 1.25%.

The move should also help Best Buy distinguish itself from other electronics retailers like Circuit City [CC], and allow it to add to the revenue being generated by its other service, Geek Squad. Broadening into a product-and-service business model will allow Best Buy to avoid vulnerability to the thin margins and price wars of consumer electronics going into the holiday season. Despite the good news, Best Buy lost 1.8% by closing bell, and Circuit City lost 2.4%.

advertisement

By late in the day Monday, five central banks had moved to quell the instability in international markets. As of Monday night, the Federal Reserve has pumped $70 billion of temporary reserves into the US banking system in hopes of allowing borrowing to continue with as little disruption as possible. The European Central Bank provided 30 billion euros in extra liquidity to European banks.

Despite what promises to be a dismal trading week, oil dropped below $100 a barrel today, and many analysts say that Fannie Mae and Freddie Mac may not ultimately need to exercise the $100 billion lines of credit offered to them by the government. The Federal Reserve has also arranged for private lines of credit for AIG, hoping to insure against its collapse.

In a bit of sad happenstance, many financial industry workers were worrying about their jobs today while their favorite companion device — the Blackberry — seemed poised to expand its family. Rumors of RIM’s first touchscreen device, dubbed the Storm, were swirling this afternoon amidst news of a leaked Verizon [VZ] document that outlines the phone’s features and advantages (a “clicking” touch-screen, for one.) Verizon was down 3.62% despite the news, and AT&T [ATT], which had been climbing thanks to breakout iPhone sales, was down 0.87%. Hopefully by the end of the month, financier customers can safely go back to worrying about choosing a Blackberry, instead of worrying about their jobs.

About the author

I've written about innovation, design, and technology for Fast Company since 2007. I was the co-founding editor of FastCoLabs.